When Is Excellence Not Enough?

Contrary to what you might expect in a fragile global economy, there won't be much talk about, or activism on, how top companies will rely even more on their supply chain to beat the competition in 2013. This year, manufacturers will be very focused on maximizing innovation and using their design chains to introduce new, share-winning products.

In other words, they will rely more upon their supply chain systems but talk less about its efficiencies.

That's my forecast for 2013, but you might be right in questioning that assumption, so let me explain. First, I am not implying that an efficient supply chain will become less important to manufacturers. Far from it. In fact, manufacturers and services companies will rely even more on the efficiencies and competitive advantages they can squeeze from their supply chains.

They need more, though, to win, because leading companies already have, or are in the process of setting up, first class supply chains as the baseline for their manufacturing operations.

The harsh reality of today's manufacturing environment dictates that supply chain departments deliver expertise as a fundamental part of their operations. In other words, the vice president or director of a supply chain must -- at a minimum -- provide market-matching/beating efficiencies and agility.

It would, of course, be preferable if they leverage supply chain resources to create competitive advantages for the enterprise, but even this will be seen as a "must-have" in the future by companies, rather than a system for which anyone should be given an award.

Much as we take for granted certain fundamental rights and necessities in life, a functional and well-executed supply chain management system is now seen by top executives as integral to operational excellence. As a result, companies are no longer willing to settle for a lesser system.

There are good reasons for this development. The supply chain evolved first as a support structure for businesses, and was then refined as a center of excellence for driving cost efficiencies.

Since then, the emergence of a hotter-than-usual competitive environment in certain high-visibility, economic sectors -- for example, consumer electronic products such as PCs, smartphones, and gaming devices -- have driven home a new reality for companies: Winning can no longer be secured by merely having prompt, efficient, and cost-effective production and deliveries (the cornerstone of the most agile supply chains), but especially through design, sales, and marketing excellence. Customers -- whether ordinary consumers or enterprises -- expect to pay the lowest possible price and promptly receive products. They also expect these products to work at the highest efficiency level.

Manufacturers that have prospered on the basis of having the most cost-efficient supply chains will find themselves in 2013 deprived of some of the advantages such systems gave them in the past. Supply chains will still be expected to perform at peak levels, and winning companies will still need this to win, but if that's all you expect to deliver as a supply chain executive in 2013, you should rethink this strategy.

In 2013, supply chain executives will need to work even more closely with their counterparts in design, distribution, sales, and marketing. This teamwork is what top executives need to deliver winning products -- not just a supply chain structure that prides itself on being agile and cost-effective.

Is your supply chain primed for this?